Politics jolts markets as Japan stocks soar 4%, bitcoin leaps to record high with gold

TOKYO – Japanese stocks surged more than 4% to an all-time high while the yen skidded on Monday after fiscal and monetary dove Sanae Takaichi was elected as leader of the ruling party, putting her on course to become the nation’s first female prime minister.

Gold climbed to a record peak above USD 3,900, while leading cryptocurrency bitcoin rallied to a lifetime high on Sunday, with investors increasingly turning to alternative assets as a store of value as the US government shutdown frayed nerves.

Japan’s Nikkei soared as much as 4.3% to an unprecedented 47,734.04 in the first 15 minutes of trading after Takaichi bested the more moderate Shinjiro Koizumi in the Liberal Democratic Party’s leadership vote on Saturday, stoking expectations for fiscal stimulus.

The yen slumped 1.6% to the cusp of 150 per US dollar while short-dated Japanese government bond yields slid to a two-week low as traders pared back bets on when the Bank of Japan will resume raising interest rates.

Market-implied odds of a BOJ hike by year-end fell to 41% from 68% on Friday.

A year ago, Takaichi criticized the BOJ’s decision to raise rates as “stupid”, although her recent rhetoric has been more restrained, saying only that central bank policy should be aligned with the government.

“We believe concerns among some investors that the next administration might pursue extreme fiscal expansion or exert political pressure on the BOJ are overblown,” Morgan Stanley MUFG Securities economists wrote in a research report, noting that Takaichi’s stance “appears closely aligned” with BOJ Governor Kazuo Ueda’s “cautious approach” to policy normalization.

Most other major share markets around the region were closed for holidays, including mainland China, South Korea, and Taiwan.

Hong Kong’s Hang Seng declined 0.3%, ahead of a holiday on Tuesday. Australia’s benchmark eased 0.1%, though trading was thinned by holidays in several states, including New South Wales and Queensland.

US S&P 500 futures pointed 0.2% higher, after the cash index rose to a record high on Friday.

The US dollar made up some ground on European currencies, capitalizing on its momentum against the yen to rebound from last week’s 0.5% decline against a basket of major peers.

The euro lost 0.25% to USD 1.1714, and sterling slipped 0.23% to USD 1.34385.

Gold last changed hands around USD 3,904 after advancing as much as 0.9% earlier to a record USD 3,919.59.

Bitcoin traded around USD 123,590 following its jump to USD 125,653.32 on Sunday.

“The shutdown matters this time around,” said Geoffrey Kendrick, head of digital assets research at Standard Chartered Bank.

“This year, bitcoin has traded with ‘US government risks,’ as best shown by its relationship to (the) US Treasury term premium,” he added.

“I suspect bitcoin will rise throughout the shutdown,” and will soon reach USD 135,000, Kendrick predicted.

Oil prices rose after OPEC+ announced on Sunday it would increase production by 137,000 barrels per day (bpd) from November, the same modest monthly increase as in October, amid persistent concerns over a looming supply glut.

In the run-up to the meeting, sources said Russia was advocating for an output increase of 137,000 bpd to avoid pressuring prices, but Saudi Arabia would have preferred double, triple or even quadruple that figure to regain market share more quickly.

Brent crude futures rose 1.3% to USD 65.39 a barrel, while US West Texas Intermediate crude was at USD 61.71, up by 1.4%.

(Reporting by Kevin Buckland)